Tuesday, July 26, 2011
J. F. Hornbeck
Specialist in International Trade and Finance
Laine Elise Rover
Congress created Trade Adjustment Assistance (TAA) in the Trade Expansion Act of 1962 to help workers and firms adjust to economic dislocation that may be caused by trade liberalization. Although most economist agree that there are substantial national gains from trade, backers of TAA argue that the government has an obligation to help those hurt by policy-driven trade opening. In addition, as an alternative to policies that might otherwise restrict imports, it can provide assistance, while supporting freer trade and diminishing prospects for potentially costly tension (retaliation) among trade partners. Often controversial, it is still strongly debated some 50 years later, on equity, efficiency, and budgetary grounds, but may still serve a pragmatic legislative function. For those Members concerned with the negative effects of trade, it can provide a countervailing response to help maintain what is often slim majority support of highly contested trade legislation. For these reasons, it has been central to U.S. trade policy for the past half century.
Over time, the fortunes of TAA have ebbed and flowed. When TAA remained a cornerstone of major trade legislation as it was in 1962, 1974, and 2002, it received long reauthorizations and increased programmatic and funding support from Congress. TAA was also expanded during times of economic downturn, as for example, in the American Recovery and Reinvestment Act (ARRA) of 2009, which added eligibility for services workers and firms. When distanced from its main policy rationale, as seen during the budget-cutting 1980s, it fared much worse, struggling at times to achieve short-term extensions with diminished resources from Congress.
TAA became part of the current trade debate when the 112th Congress and the Obama Administration began to consider the three pending free trade agreements (FTAs) with South Korea, Panama, and Colombia along with TAA extension. Two issues dominate the immediate discussion. First, Members disagree on the need to continue funding TAA programs. Second, they dispute whether to include TAA as part of an implementing bill for the proposed U.S.-South Korea (KORUS) FTA. Opponents of TAA consider it a costly and ineffective response to dislocation from imports, and so would like to see it debated and voted on as a separate bill. Supporters of TAA and especially the extended ARRA benefits (now lapsed) see the implementing bill as perhaps the best, if not only opportunity, to reauthorize TAA in the near future, given resistance in a Congress intently focused on deficit reduction. Those supporting TAA and not the KORUS FTA might also prefer to see separate votes on the two issues.
Because there is disagreement over TAA, even to the point of perhaps imperiling congressional action of FTA implementing bills, the situation again points to the centrality of TAA in the longterm national trade policy debate. Key policy questions include determining if: (1) the United States still has an ongoing obligation to help stakeholders hurt by imports; (2) TAA can be an effective approach to meeting this goal; (3) a TAA budget compromise can be found; (4) TAA can still help form a consensus on trade policy, and if so; (5) how the budgetary costs of TAA programs compare to the potential opportunity costs of possibly adopting more protectionist policies in the absence of TAA.
For details on the TAA programs for workers, firms, communities, and farmers, see other CRS reports.
Date of Report: July 19, 2011
Number of Pages: 19
Order Number: R41922
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